<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant X
Filed by a party other than Registrant
Check the appropriate box:
Preliminary Proxy Statement
X Definitive-Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FIRST MORTGAGE CORPORATION
(Name of Registrant as Specified in its Charter)
FIRST MORTGAGE CORPORATION
(Name of Person(s) Filing Proxy Statement
Payment of Filing Fee (Check the appropriate box):
$125 per Exchange Act Rules 0-11(c) (1) (ii), 14a-6(i), or 14a-6(i)(2)
$500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(I)(3)
Fee computed on table below per Exchange Act rules 14a-6(i)(4)and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction
*Set forth the amount on which the filing fee is calculated and state
how it was determined.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and-identify the filing for which-the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
August 24, 1999
To Our Shareholders:
You are cordially invited to attend the annual meeting of
shareholders of First Mortgage Corporation on September 22, 1999,
beginning at 10:00 a.m., at the Shilo Inn Hilltop Suites Hotel, 3101
Temple Street, Pomona, California 91768.
Details of business to be conducted at the annual meeting are
provided in the enclosed Notice of Annual Meeting of Shareholders and
Proxy Statement. Also enclosed for your information is a copy of our
Annual Report to Shareholders for 1999.
We hope that you will attend the annual meeting. In any event,
please sign, date and return the enclosed form of proxy in the
accompanying envelope as promptly as possible so that your shares
will be voted at the meeting in accordance with your instructions.
Very truly yours,
Clement Ziroli
Chairman of the Board
and Chief Executive Officer
<PAGE>
3230 Fallow Field Drive
Diamond Bar, CA 91765
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 22, 1999
To the Shareholders of First Mortgage Corporation:
The Annual Meeting of the Shareholders of First Mortgage
Corporation, a California corporation (the "Company"), will be held
on September 22, 1999, beginning at 10:00 a.m., at the Shilo Inn
Hilltop Suites Hotel, 3101 Temple Street, Pomona, California 91768
for the following purposes:
1. To elect a Board of Directors of five members;
2. To approve the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31,
2000; and
3. To consider and transact such other business as may properly come
before the meeting and at any and all adjournments thereof.
The Board of Directors has fixed the close of business on August
12, 1999 as the record date for determining those shareholders
entitled to notice of, and to vote at, the meeting and at any and
all adjournments thereof.
By Order of the Board of Directors
Robyn S. Fredericks
Secretary
August 24, 1999
Diamond Bar, California
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN
THE ENCLOSED FORM OF PROXY IN THE ACCOMPANYING ENVELOPE AS PROMPTLY
AS POSSIBLE SO THAT YOUR SHARES WILL BE VOTED AT THE MEETING IN
ACCORDANCE WITH YOUR INSTRUCTIONS.
<PAGE>
3230 Fallow Field Drive
Diamond Bar, CA 91765
_____________________________
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held September 22, 1999
This Proxy Statement and the accompanying form of proxy are being
mailed to shareholders on or about August 24, 1999 in connection with
the solicitation by the Board of Directors of First Mortgage
Corporation, a California corporation (the "Company"), of proxies for
use at the annual meeting of shareholders of the Company on September
22, 1999, and at any and all adjournments thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting.
Although the principal solicitation of proxies is being made
through this Proxy Statement, proxies may also be solicited
personally, by telephone or by mail by directors, officers or
employees of the Company. Such persons will not receive any
additional compensation for their solicitation services. The Company
will pay the entire expense of preparing, printing and mailing proxy
solicitation material on behalf of the Board of Directors, including
amounts paid in reimbursement to banks, brokerage firms and others
for their expenses in forwarding soliciting material to beneficial
owners of shares of the Company's common stock, no par value ("Common
Stock").
VOTING SECURITIES
The Board of Directors has fixed the close of business on August
12, 1999 as the record date for determining those shareholders
entitled to notice of, and to vote at, the annual meeting and at any
and all adjournments thereof. As of August 12, 1999, there were
5,302,697 shares of Common Stock issued and outstanding and entitled
to vote at the annual meeting. The Company has no other voting
securities outstanding. Each shareholder of record is entitled to
one vote per share owned on all matters submitted to a vote of
shareholders except that, as described in more detail below, each
shareholder is entitled to cumulate his or her votes in electing
directors.
Shares represented by duly executed and dated proxies in the
accompanying form and received before the annual meeting will be
voted at the annual meeting. Where a shareholder specifies a choice
on the proxy with respect to any matter to be acted upon, the shares
will be voted accordingly by the proxy holders named in the proxy.
Where no choice is specified, the shares represented by the proxy
will be voted (i) as described below with respect to the election of
directors, (ii) to approve the appointment of Ernst & Young LLP as
independent auditors of the Company for the fiscal year ending March
31, 2000, and (iii) in accordance with the best judgment of the proxy
holders with respect to any other business that properly comes before
the annual meeting.
A shareholder has the power to revoke a proxy at any time before
it is exercised by filing with the Secretary of the Company either an
instrument revoking the proxy or a duly executed proxy bearing a
later date. A proxy may also be revoked by a shareholder who is
present at the annual meeting and who expresses a desire to vote in
person.
<PAGE>
The presence in person or by proxy of a majority of the shares of
Common Stock entitled to vote at the annual meeting will constitute a
quorum for the transaction of business. Abstentions on any
particular matter will be counted for purposes of determining the
presence of a quorum. Abstentions will also be treated as shares
that are present and entitled to vote with respect to the matter on
which the abstentions are indicated but as unvoted with respect to
the matter. If a broker indicates on the proxy that it does not have
discretionary authority to vote certain shares on a particular
matter, those shares will be counted for purposes of determining the
presence of a quorum. However, the shares will not be treated as
shares that are present and entitled to vote with respect to the
matter as to which the broker indicates that it lacks voting
authority.
Assuming the presence of a quorum: (a) the five persons receiving
the highest number of affirmative votes of the shares of Common Stock
entitled to be voted on the matter will be elected as directors of
the Company; and (b) approval of the appointment of Ernst & Young LLP
requires the affirmative vote of a majority of the shares of Common
Stock represented in person or by proxy at the annual meeting and
voting on the matter, provided that such shares voting affirmatively
must also constitute at least a majority of the required quorum for
the meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Voting Procedures
Five directors will be elected at the annual meeting, each to hold
office until the next annual meeting of shareholders and the election
and qualification of a successor or the director's earlier death,
resignation or removal.
Under California law, each shareholder who is entitled to vote at
the annual meeting has cumulative voting rights in connection with
the election of directors. Under cumulative voting, a shareholder
may cast a number of votes equal to the number of shares of Common
Stock standing in such shareholder's name as of August 12, 1999,
multiplied by the number of directors to be elected. A shareholder
exercising cumulative voting rights is entitled to cast all such
votes for a single nominee for director or for any two or more
nominees in such proportion as the shareholder may decide. However,
under California law, a shareholder may not cumulate votes for a
candidate unless the candidate's name has been placed in nomination
prior to the voting and unless the shareholder has given notice at
the annual meeting prior to the voting of the shareholder's intention
to cumulate votes. If any one shareholder has given such notice, all
shareholders are entitled to cumulate their votes.
The Board of Directors recommends that shareholders grant proxies
to vote for all five of the nominees for directors listed below. In
order to permit the election of all or as many as possible of the
following nominees, the Board of Directors also recommends that
shareholders do not cast their votes on a cumulative basis. Unless
marked otherwise, proxies will be voted by the proxy holders in such
a manner as to elect all or as many of the following nominees as
possible. Unless marked otherwise, proxies will give the proxy
holders discretionary authority to cumulate votes if they so choose
and to allocate votes among the nominees in such manner as they
determine is necessary in order to elect all or as many of such
nominees as possible.
<PAGE>
If any of the nominees listed below refuses or is unable to serve
as a director, the proxy holders will vote for a substitute nominee
or nominees recommended by the Board of Directors. Each of the
following nominees has agreed to serve if elected, and the Board of
Directors has no reason to believe that any of such nominees will be
unwilling or unable to serve if elected as a director.
Nominees to the Board of Directors
<TABLE>
The following persons have been nominated for election as
directors:
<CAPTION>
Name Age Position
<S> <C> <C>
Clement Ziroli 57 Chairman of the Board
and Chief Executive Officer
Bruce G. Norman 58 President, Chief Operating
Officer And Director
Pac W. Dong 49 Executive Vice President,
Chief Financial Officer,
Controller And Director
Harold Harrigian (1) (2) 64 Director
Robert E. Weiss (1) (2) 70 Director
<FN>
<F1>
(1) Member of the Audit Committee.
<F2>
(2) Member of the Compensation Committee.
</FN>
</TABLE>
Clement Ziroli has served as Chairman of the Board of Directors of
the Company and Chief Executive Officer since 1975. He also served
as its President from 1975 to 1995. Mr. Ziroli devotes approximately
90% of his business time to the management of the Company. Since
1970, Mr. Ziroli has also served as the Chairman of the Board of
Directors, President and Chief Executive Officer of Fin-West Group
("Fin-West"), which owns 90.6% of the outstanding shares of the
Company's Common Stock.
Bruce G. Norman has served as a director and Chief Operating
Officer of the Company since 1975. He also held the position of
Executive Vice President until December 1995 when he was promoted to
President of the Company. Mr. Norman served as the President and a
member of the Board of Directors of the California Mortgage Bankers
Association (the "CMBA") during 1998-1999, previously also served as
the First and Second Vice President during 1996-1997, as the Chairman
of its Employment Training Panel committee during 1993-1996, as
Chairman of its Education committee during 1991-92, as a member of
its Board of Directors and as its Secretary during 1990-91, and as
Chairman of the Single Family committee during 1989-90. He was also
on the Residential Loan Production and Membership Committees of the
Mortgage Bankers Association of America. Mr. Norman is a member of
the Board of Directors of Fin-West.
<PAGE>
Pac W. Dong has served as the Company's Chief Financial Officer
and Controller since 1976. He has served as a director of the
Company since June 1992. He held the position of Senior Vice
President until December 1995 when he was promoted to an Executive
Vice President of the Company. He also served on the
Warehouse/Treasury Committee of CMBA during 1994-1995.
Harold Harrigian has served as a director of the Company and as a
member of its Compensation and Audit Committee since June 1992. Mr.
Harrigian was a partner and served as Director of the Corporate
Finance Department of the investment banking and securities firm of
Crowell, Weedon & Co. from 1984 to 1998, when he retired from the
firm. He served as a director of The MacNeal-Schwendler Corporation
from 1986 to June 1998. He has served as a director of Cohu, Inc.
since October 1998. Currently, he is a financial consultant.
Robert E. Weiss has served as a director of the Company and as a
member of its Compensation and Audit Committee since June 1992. Mr.
Weiss is an attorney and has practiced with the firm of Robert E.
Weiss Incorporated since 1959.
Committees and Meetings of the Board of Directors
The business of the Company is managed by and under the direction
of the Board of Directors as provided by the laws of California, the
Company's state of incorporation. During the fiscal year ended March
31, 1999, the Board of Directors met four times. During the last
fiscal year, each director attended at least 75% of the aggregate
number of meetings of the Board of Directors and those committees of
the Board of Directors on which he served.
The Audit Committee of the Board of Directors reviews and comments
upon the scope of the independent auditors' assignments and related
fees, the accounting principles applied by the Company in financial
reporting, the scope of internal auditing procedures and the adequacy
of internal controls. The Audit Committee was appointed in July
1992. Its members are Harold Harrigian and Robert E. Weiss. The
Audit Committee met one time during fiscal 1999.
The primary function of the Compensation Committee, which was
appointed in July 1992, is to review and approve the Company's
executive compensation policies and to administer the Company's 1992
Stock Incentive Plan. Messrs. Harrigian and Weiss are the members of
the Compensation Committee. The Compensation Committee held two
meetings during fiscal 1999.
The Board of Directors has not appointed a Nominating Committee.
The Board of Directors will consider director nominations recommended
by shareholders but has not established formal procedures for the
submission of such recommendations.
<PAGE>
Executive Officers
<TABLE>
Set forth below is certain information about the Company's
executive officers. Each executive officer holds office until his or
her successor is elected or until his or her earlier death,
resignation or removal by the Company's Board of Directors.
<CAPTION>
Name Age Position
<S> <C> <C>
Clement Ziroli 57 Chairman of the
Board and Chief
Executive
Officer
Bruce G. Norman 58 President, Chief
Operating
Officer and
Director
Pac W. Dong 49 Executive Vice
President, Chief
Financial
Officer,
Controller and
Director
Ronald T. Vargas 54 Senior Vice
President
Scott Lehrer 47 Senior Vice
President
Robyn S. Fredericks 46 Vice President and
Secretary
</TABLE>
Additional information regarding Messrs. Ziroli, Norman and Dong
is set forth above under "Nominees to the Board of Directors."
Ronald T. Vargas has served as a Senior Vice President since 1975.
Mr. Vargas served as Chairman of the California Housing Agency
Committee of the CMBA during 1991-1992.
Scott Lehrer has served as a Senior Vice President of the Company
since May 1994. Before joining the Company, he served as a Vice
President at Sanwa Bank in charge of the residential real estate
department since November 1987. Mr. Lehrer served as Chairman of the
Loan Servicing Committee of the CMBA during 1998-1999.
Robyn S. Fredericks has served as the Company's Secretary and as
its Vice President since 1975.
Security Ownership of Certain Beneficial Owners and Management
With respect to each person known by the Company to be the
beneficial owner of more than five percent of its Common Stock, each
director and nominee for director of the Company, each executive
officer of the Company named in the Summary Compensation Table, and
all current directors and executive officers of the Company as a
group, the following table sets forth (i) the number of shares of
Common Stock beneficially owned as of July 15, 1999 by each such
person or group, and (ii) the percentage of the outstanding shares of
the Company's Common Stock beneficially owned as of July 15, 1999 by
each such person or group. Unless otherwise indicated, each of the
following shareholders has, to the Company's knowledge, sole voting
and investment power with respect to the shares beneficially owned,
except to the extent that such authority is shared by spouses under
applicable law.
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Common Stock
Beneficially Beneficially
Owned as of Owned as of
Name of Beneficial Owner July 15, 1999 July 15, 1999
<S> <C> <C>
Fin-West Group (1) 4,804,075 90.6%
Clement Ziroli (1)(2) 4,883,825 90.7%
Wellington Management Co. (3) 227,875 4.3%
Bruce G. Norman (2) 54,250 1.0%
Pac W. Dong (2) 44,375 *
Harold Harrigian (2) 30,625 *
Robert E. Weiss (2) 33,750 *
All directors and executive
officers as a group (8 persons)
(2)(4) 5,095,600 91.21%
* Owns less than 1% of the Company's outstanding shares of
Common Stock.
<FN>
<F1>
(1) The business address of Fin-West and Mr. Ziroli is 3230 Fallow
Field Drive, Diamond Bar, California 91765. Fin-West is the
record holder of 4,804,075 shares of the Company's Common Stock.
By reason of his ownership of approximately 69.6% of the
outstanding shares of the capital stock of Fin-West, Mr. Ziroli
shares voting and investment power, and the beneficial ownership,
of the 4,804,075 shares of the Common Stock as to which Fin-West
is the record holder. Mr. Ziroli is not the record holder of any
shares of Common Stock, although he does hold options to acquire
79,750 shares. The foregoing information is based in part upon a
Schedule 13D dated April 22, 1992 that Fin-West and Mr. Ziroli
filed with the Securities and Exchange Commission.
<F2>
(2) Information presented includes shares which the specified
person or group has the right to acquire within sixty days after
July 15, 1999 through the exercise of stock options, as follows:
Mr. Ziroli, 79,750 shares; Mr. Norman, 54,250 shares; Mr. Dong,
44,000 shares; Mr. Harrigian, 28,750 shares; Mr. Weiss, 28,750
shares; and all directors and executive officers as a group,
285,275 shares.
<F3>
(3)The business address of Wellington Management Company, LLP
("WMC") is 75 State Street, Boston, Massachusetts 02109. In its
capacity as investment advisor, WMC may be deemed the beneficial
owner of 227,875 shares of the Company's Common Stock which are
owned by various investment advisory clients. WMC has shared
investment power with respect to all of such 227,875 shares. The
foregoing information is based upon a Schedule 13G dated December
31, 1998 that WMC filed with the Securities and Exchange
Commission.
<F4>
(4)Information regarding the number of shares of the Company's
Common Stock beneficially owned by all directors and executive
officers includes the 4,804,075 shares that are owned by Fin-West
and in which Mr. Ziroli has a beneficial ownership interest, as
described above.
</FN>
</TABLE>
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons
who own more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange
Commission (the "Commission") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten
percent stockholders are required by Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended March 31, 1999, all Section 16(a) filing
requirements applicable to its officers, directors and greater than
ten percent beneficial owners were satisfied.
Executive Compensation
<TABLE>
Summary Compensation Table
The following table sets forth certain information concerning the
compensation of the Chief Executive Officer and the other named
executive officers of the Company for the 1999, 1998 and 1997 fiscal
years.
The following table sets forth certain information concerning the
compensation of the Chief Executive Officer and the other named
executive officers of the Company for the 1999, 1998 and 1997 fiscal
years.
<CAPTION>
Long-Term
Compensation
Annual Awards
Compensation (1)
Securities
Name and Underlying All Other
Principal Year Salary Bonus $ Options/SARS Compensation
Position $ (2) (2) (#) $ (3)
<S> <C> <C> <C> <C> <C>
Clement Ziroli 1999 $300,000 $599,655 25,500 $7,485
Chairman of 1998 334,998 181,443 11,000 2,693
The Board and 1997 370,000 208,195 11,000 -
Chief
Executive
Officer
Bruce G. Norman 1999 265,000 469,158 5,500 7,485
President and 1998 235,000 139,716 10,000 2,693
Chief Operating 1997 210,000 204,050 10,000 -
Officer
Pac W. Dong 1999 130,000 342,660 4,500 6,081
Executive 1998 130,000 83,075 9,000 2,188
Vice 1997 117,500 74,442 9,000 -
President,
Chief
Financial
Officer and
Controller
<FN>
<F1>
(1) In accordance with Securities and Exchange Commission
regulations, this table does not include perquisites and other
personal benefits valued at the lesser of $50,000 or 10% of the
total salary and bonus reported for the named executive officer.
In addition to Mr. Ziroli, the Company had only two other
officers who served as executive officers and whose total salary
and bonus for the 1999 fiscal year exceeded $100,000.
<PAGE>
<F2>
(2) Includes amounts deferred by the named executive officer under
the Company's 401(k) Profit Sharing Plan.
<F3>
(3) Amounts included under All Other Compensation were contributed
by the Company to its 401(k) Profit Sharing Plan for the named
executive officer.
</FN>
</TABLE>
<TABLE>
Options/SAR Grants in Last Fiscal Year
The following table sets forth certain information concerning
stock options granted during the fiscal year ended March 31, 1999 to
the individuals named in the Summary Compensation Table. No stock
appreciation rights were granted to any person.
(CAPTION>
<CAPTION>
Individual Grants
__________________
% of Potential Realizable
Number of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for
Options Employees in Price Expiration Option Term (2)
Name Granted (#)(1) Fiscal Year ($/Share) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Clement Ziroli 25,500 29.6% $4.74 7/30/2003 $33,394 $73,792
Bruce G. Norman 5,500 6.4% $4.31 7/30/2003 $6,549 $14,472
Pac W. Dong 4,500 5.2% $4.31 7/30/2003 $5,358 $11,841
<FN>
<F1>
(1) All of the stock options awarded to the named executive
officers were granted on July 31, 1998 and became exercisable in
full on January 31, 1999. All of the options were granted at an
exercise price equal to the closing price of a share of the
Company's Common Stock on the grant date. All of the options are
incentive stock options, except that Mr. Ziroli received
nonqualified stock options for 11,000 shares.
<F2>
(2)The potential realizable value shown in this table represents the
hypothetical gain that might be realized based on assumed 5% and
10% annual compound rates of stock price appreciation over the
full option term. These prescribed rates are not intended to
forecast possible future appreciation of the Common Stock.
Actual gains, if any, on stock option exercises are dependent
upon the future performance of the Company's Common Stock and
overall market conditions.
</FN>
</TABLE>
The following table sets forth certain information concerning the
number and value of stock options as of March 31, 1999. None of the
named executive officers exercised any options during the fiscal year
ended March 31, 1999. No stock appreciation rights have been granted
by the Company.
<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at The-Money Options at
Name March 31, 1999 March 31, 1999 (1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Clement Ziroli 79,750 0 $1,650 0
Bruce G. Norman 54,250 0 $5,000 0
Pac W. Dong 44,000 0 $4,500 0
<FN>
<F1>
(1) The value of unexercised in-the-money options at March 31, 1999
represented the spread between the exercise price set at the date
of grant and the $4.3125 closing price of the Company's common
stock on March 31, 1999, the last business day of the 1999 fiscal
year.
</FN>
</TABLE>
Compensation of Directors
The Company pays each of its directors who is not an officer or
employee of the Company an annual retainer fee of $8,000 plus a $750
fee for each Board meeting attended by the director. Directors who
are officers or employees of the Company do not receive any
additional compensation for serving as directors. Each non-employee
director who is a member of the Compensation or Audit Committee also
receives a fee of $500 for each committee meeting attended.
Under the Company's 1993 Stock Option Plan for Non-Employee
Directors, each non-employee director also receives a nonqualified
stock option each year on the last business day of July to purchase
5,750 shares of the Company's Common Stock at an exercise price equal
to the closing price of a share of Common Stock on that date. Each
stock option becomes exercisable in full on the 185th day after its
grant date and terminates five years after its grant date but is
subject to earlier termination if the director terminates his or her
service as a director. In accordance with this plan, on July 31,
1998, Messrs. Harrigian and Weiss each received an option to purchase
5,750 shares of Common Stock at a purchase price of $4.31 per share.
Employment Contracts, Termination of Employment and Change-In-Control
Arrangements
On October 1, 1997, the Company entered into new employment
agreements with each of Clement Ziroli, Bruce G. Norman and Pac W.
Dong. The agreements are identical except for their provisions
regarding employment titles, base salaries and bonuses. Pursuant to
his agreement, Mr. Ziroli serves as the Company's Chairman of the
Board of Directors and Chief Executive Officer; pursuant to his
agreement, Mr. Norman serves as the Company's President and Chief
Operating Officer; and pursuant to his agreement, Mr. Dong serves as
an Executive Vice President and as the Company's Chief Financial
Officer and Controller.
<PAGE>
Each employment agreement was extended on March 31, 1999 for the
period of one year, commencing April 1, 1999 and ending March 31,
2000. In the event that the Company and the executive officers have
not entered into a new agreement on April 1, 2000, the terms of the
existing agreement will continue on a month to month basis until a
new employment agreement is executed. Mr. Ziroli receives an annual
base salary of $300,000; Mr. Norman receives an annual base salary of
$265,000; and Mr. Dong receives an annual base salary of $130,000.
Each executive officer is also entitled to receive an annual cash
bonus, which is determined by, and calculated in accordance with, the
Company's satisfaction of certain objective performance goals
established by the Compensation Committee and described in the
agreement. Each executive officer also receives all standard Company
employee benefits and the right to participate in the Company's Stock
Incentive Plan.
Each employment agreement provides that the executive officer may
terminate his employment voluntarily, and that the Company may
terminate his employment for cause, which is defined as the officer's
conviction of a felony, his willful and continued failure to perform
his duties or his willful and gross misconduct. The executive
officer's right to receive further compensation under the agreement
ceases as of the date of such employment termination, subject to his
right to receive any previously earned but unpaid salary and bonus
and subject to his right to receive a bonus on a pro rata basis for
the portion of the term of employment in which he was employed by the
Company, the amount of such pro rata bonus to be calculated in
accordance with the objective performance goals described in the
employment agreement.
The Company has not entered into employment agreements or
termination of employment arrangements with any of its other
executive officers, and the Company has not entered into change-in-
control agreements or arrangements with any of its executive
officers.
Compensation Committee Interlocks and Insider Participation
The current members of the Company's Compensation Committee are
Harold Harrigian and Robert E. Weiss. No other persons served as
members of the Compensation Committee during the fiscal year ended
March 31, 1999.
Mr. Harrigian has served as a director of the Company since June
1992. Mr. Harrigian is a partner with the investment banking and
securities firm of Crowell, Weedon & Co., which served as the
managing underwriter of the Company's initial public offering of
1,293,750 shares of Common Stock in April 1992. He retired from the
firm in 1998.
Mr. Weiss has served as a director of the Company since June 1992.
Mr. Weiss is an attorney with the firm of Robert E. Weiss
Incorporated, which rendered legal services to the Company during the
fiscal year ended March 31, 1999. The amount of the Company's
payments to Robert E. Weiss Incorporated for such services did not
exceed five percent of that firm's gross revenues for its last full
fiscal year.
Fin-West owns 90.6% of the Company's outstanding shares of Common.
Clement Ziroli, the Chairman of the Board and Chief Executive Officer
of the Company, owns 69.6% of the outstanding shares of the capital
stock of Fin-West and is the Chairman of the Board, President and
Chief Executive Officer of Fin-West. Bruce G. Norman is an executive
officer and a director of the Company and Fin-West. Pac W. Dong is
an executive officer and a director of the Company and an executive
officer of Fin-West. Ronald T. Vargas is an executive officer of the
Company and an <PAGE>
executive officer and a director of Fin-West. Robyn S. Fredericks is
an executive officer of both the Company and Fin-West. Messrs.
Norman, Dong, Vargas and Ms. Fredericks are also shareholders of Fin-
West and, in the aggregate, own 15.3% of the outstanding shares of
the capital stock of Fin-West.
From time to time, the Company has engaged in various transactions
with (i) Mr. Ziroli, (ii) Fin-West, and (iii) several entities that
are wholly-owned or majority-owned by Fin-West.
The Company leases the building which serves as its principal
executive office from Fin-West under the terms of a lease agreement
that expired on December 31, 1997. The Company negotiated a lease
extension to renew the lease 3 times, each time for one additional
year, starting January 1, 1998. The monthly rental will be $22,000
effective April 1, 1998. The monthly rental payment for any lease
extension is subject to increase (but not decrease), provided that
such payments may not exceed the fair market rent for comparable
facilities at the time of the extension. The Company's annual lease
payments were $264,000 for the fiscal year ended March 31, 1999. The
Company believes that the lease payments are more favorable than the
prevailing rates for comparable office space within substantially the
same geographic area.
In 1985, the Company made a $500,000 loan to Fin-West that was
used to construct, and is secured by, the building in which the
Company's executive offices are located. The loan was non-interest
bearing until the 1991 fiscal year, when interest began to accrue at
the rate of 6% per annum. The unpaid principal amount of the loan
was fully repaid in March 1999. Aggregate interest payments made by
Fin-West to the Company during the fiscal year ended March 31, 1999
were $7,475.
Fin-West owns 56.5% of the outstanding capital stock of Nations
Holding Group ("NHG") (formerly UTC Financial Corporation). United
Title Company ("UTC"), a subsidiary of NHG, provides title insurance
services to the general public and it charges a uniform rate to all
of its customers, including services rendered to the Company. Less
than 5% of the business of UTC was derived from the Company in the
last fiscal year.
Hacienda Service Corporation ("Hacienda Service") is a wholly-
owned subsidiary of Fin-West that provides homeowners' insurance
policies to purchasers of residential property. Substantially all of
Hacienda Service's revenues are derived from customers referred to it
by the Company. Hacienda Service charges a uniform rate for its
services, including services rendered as a result of the Company's
referrals.
The Company anticipates that it will continue to engage in the
foregoing transactions or in other transactions with Fin-West and its
affiliated companies. To ensure that such transactions are fair and
reasonable to the Company and are on terms that are no less favorable
to the Company than those that could be obtained from an unaffiliated
third party, the Company has adopted a policy that prohibits engaging
in any such transaction without the authorization or approval of a
majority of the Company's directors who do not have a material
financial or other interest in the transaction.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of the Company's two
independent outside directors, neither of whom are officers or
employees of the Company. It was formed shortly after the Company
became a publicly held company in 1992. The Compensation Committee
is responsible for making decisions concerning, and the
administration of programs regarding, the compensation of the
Company's executive officers. Decisions of the Compensation
Committee relating to the compensation of the Company's executive
officers are submitted to the full Board of Directors for review and
approval, except that decisions concerning awards to executive
officers under the Company's Stock Incentive Plan are made solely by
the Compensation Committee. The Board of Directors approved all of
the Compensation Committee's decisions that were submitted to it
regarding the executive officers' compensation for the 1999 fiscal
year.
Compensation Philosophy
The policy of the Company and the Compensation Committee toward
executive compensation continues to be based upon the belief that the
compensation received by executive officers should be properly
integrated with the Company's annual and long-term profitability and
operating performance objectives. The Company's executive
compensation program is also based upon the belief that the
compensation-related interests of its executive officers should be
directly aligned with the interests of its shareholders, and that a
significant portion of each executive officer's compensation should
be tied to the earnings of the Company. To a large degree, however,
the Company also recognizes that stock price performance as it
pertains to the mortgage banking industry is substantially influenced
by many factors, especially the rapidly changing mortgage industry
conditions, and it may not necessarily be the best measure of
executive performance.
To achieve these goals, the Company provides its executive
officers with annual bonuses that are based upon the Company's
profitability and other elements of financial performance as well as
stock options which will increase in value only upon increases in the
market value of the Company's stock. The Company and the
Compensation Committee believe that this compensation philosophy has
permitted the Company to attract and retain motivated and effective
executive officers in a very competitive and highly volatile
industry.
Compensation Components
The components of the Company's compensation program for its
executive officers in fiscal year 1999 are base salaries, bonuses and
option awards under the Stock Incentive Plan. The factors that the
Compensation Committee considered in connection with determining the
amounts of various components of the compensation received by the
Company's executive officers are described below. Except as
specifically described below, the Compensation Committee did not
assign any specific weights to these factors and the actual
compensation in any particular year may be above or below that of the
Company's competitors.
Base Salaries
In establishing the base salaries for Messrs. Ziroli, Norman and
Dong as set forth in their employment agreements, and in determining
the base salary received by other executive officers during the 1999
fiscal year, the Compensation Committee continued its policy of
establishing a strong connection between the compensation of its
executive officers and the profitability and performance of
<PAGE>
the Company. It also considered past performance, any increase in
duties and responsibilities of the executive officers and the
compensation of officers at other traditional full service mortgage
banking firms.
Bonuses
Consistent with the Company's compensation philosophy, the
Compensation Committee believes that executive officers should be
rewarded if the Company achieves profitability and meets overall
business goals. Accordingly, bonuses vary substantially from year-to-
year depending upon whether the Company achieves superior results or
fails to meet performance expectations. Depending upon the Company's
performance, the bonuses awarded to the Company's executive officers
may be above or below those received by executive officers at
comparably sized competitors.
In order to achieve a direct, objectively determined connection
between the financial performance of the Company and the compensation
of its most highly compensated executive officers, the employment
agreements for Messrs. Ziroli, Norman and Dong provide that the bonus
(if any) to be received by each executive officer is calculated
solely in accordance with the Company's profit performance under a
predetermined formula that is based upon net income before taxes.
Based upon the formula that is set forth in his employment
agreement, Mr. Ziroli received a bonus of $599,655 during the 1999
fiscal year. His annual bonus was determined pursuant to the Annual
Profit Bonus formula as contained in his employment agreement,
reflecting the substantial improvements in the Company's results of
operations over the prior fiscal year. It exceeded the minimum
profit goal established before the beginning of the fiscal year.
Bonuses during the 1999 fiscal year to executive officers other
than Messrs. Ziroli, Norman and Dong were also calculated solely in
accordance with the Company's performance under predetermined
formulas that were approved by the Compensation Committee and that
were based upon objective criteria such as mortgage loan production,
net income before taxes and the size of the mortgage servicing
portfolio administrated by the Company. Each such executive
officer's bonus formula was developed after a review of his or her
duties and responsibilities.
Stock Incentive Plan Awards
The Compensation Committee administers the Company's Stock
Incentive Plan, under which options to purchase shares of the
Company's Common Stock are awarded to executive officers and other
eligible employees. The grant of the stock options is intended to
motivate and retain these officers and employees needed to execute
the long-term strategic plan for the growth of the Company. The
Compensation Committee believes that granting the stock options to
executive officers and other employees aligns their interests with
those of the Company's shareholders since the value of the options
will increase only if the market value of the Company's stock
increases.
During the 1999 fiscal year, the Compensation Committee awarded
options covering a total of 44,000 shares of Common Stock to the
Company's executive officers of which options covering 25,500 shares
of Common Stock were awarded to Mr. Ziroli. Non-executive officers
and employees received options covering a total of 42,050 shares of
common stock. All options were granted at an exercise price of $4.31
per share, which was the market value of the underlying Common Stock
on the grant date, and options became exercisable in full on January
31, 1999.
<PAGE>
In determining the size of the option awards to executive officers
(other than Mr. Ziroli) and to other employees, the Compensation
Committee considered the recommendations of the Chief Executive
Officer and other members of management. These recommendations were
based upon the same objective and subjective factors described above
which were used in determining the bonuses for the 1999 fiscal year
and also took into account prior awards of options to the officers
and employees and the option awards made by comparable companies.
The same factors were considered in determining the size of Mr.
Ziroli's option award.
Compliance with Internal Revenue Code Section 162(m)
Internal Revenue Code Section 162(m), enacted in 1993, generally
precludes a publicly held corporation from taking a tax deduction for
compensation in excess of $1,000,000 that is paid in any year to its
chief executive officer or any of its four other highest paid
executive officers. Certain performance-based compensation is not
subject to the deduction limit if shareholder approval is obtained
and if other specified requirements are satisfied.
The Compensation Committee believes that, under ordinary
circumstances, the Company's compensation programs should be
structured in a manner that is designed to comply with the
requirements of Section 162(m) and any regulations promulgated
thereunder in order to ensure the full deductibility of all
compensation paid to the Company's executive officers. The
Compensation Committee does not anticipate that the compensation
which is payable to any of the Company's executive officers during
the current taxable year will exceed $1,000,000.
COMPENSATION COMMITTEE
Robert E. Weiss, Chairman
Harold Harrigian
<PAGE>
COMPANY STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the
cumulative total shareholder returns, assuming $100 was invested on
March 31, 1994, on the Company's Common Stock, the NASDAQ - Total US
and the SNL Traditional Mortgage Bank Index for the period commencing
March 31, 1994 and ending March 31, 1999. The stock price
performance shown below is not necessarily indicative of future price
performance. The graph assumes the reinvestment of dividends on a
daily basis.
PERFORMANCE GRAPH FOR FIRST MORTGAGE CORPORATION
INDEXED COMPARISON OF CUMULATIVE TOTAL RETURN
FIRST MORTGAGE CORPORATION, THE NASDAQ -- TOTAL US AND
SNL TRADITIONAL MORTGAGE BANK INDEX
<TABLE>
<CAPTION>
Period Ending
Index 3/31/94 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99
<S> <C> <C> <C> <C> <C> <C>
First Mortgage Corporation 100.00 65.31 102.04 67.35 62.24 65.31
NASDAQ - Total US 100.00 111.25 151.05 167.85 254.76 342.88
SNL Traditional Mortgage
Bank Index 100.00 106.11 130.29 146.39 292.45 246.32
</TABLE>
<PAGE>
Certain Relationships and Related Transactions
The Company is a participant in a profit sharing plan maintained
by Fin-West (the "Profit Sharing Plan") designed to qualify under
Section 401(k) of the Internal Revenue Code of 1986, as amended, in
which all of the employees of Fin-West and its affiliated companies
who have completed at least one year of service are eligible to
participate other than the employees at the Covina, California branch
of Hacienda Escrow. The Profit Sharing Plan purchases mortgage loans
from the Company for investment purposes, although the Profit Sharing
Plan generally purchases no more than five loans per year. The
Company guarantees all loans that it sells to the Profit Sharing
Plan. The Company has adopted a policy that it will not sell a
mortgage loan to the Profit Sharing Plan for a price that is less
than the fair market price for such loan in the secondary mortgage
market.
A description of certain transactions between the Company and its
directors, executive officers and entities in which such directors
and executive officers have an interest is presented above under
"Compensation Committee Interlocks and Insider Participation."
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has selected Ernst & Young LLP as its independent
auditors for the current fiscal year. Because appointment of the
Company's independent auditors is an important decision, the Board of
Directors has elected to seek ratification by the shareholders of the
appointment of Ernst & Young LLP. If the appointment is not
ratified, the Board of Directors will reconsider the appointment.
Ernst & Young LLP has examined the financial statements of the
Company since 1992 and management is satisfied with their quality of
professional services. It is anticipated that representatives of
Ernst & Young LLP will be present at the annual meeting. They will
be afforded an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31,
2000. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED WILL BE VOTED
FOR THIS PROPOSAL.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors knows of no other business to be presented
at the annual meeting. If any other business properly comes before
the annual meeting, it is the intention of the persons named in the
accompanying form of proxy or their substitute(s) to vote on that
business in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Shareholders of the Company who intend to submit proposals to the
Company's shareholders for inclusion in the Company's proxy statement
and form of proxy relating to the next annual meeting of shareholders
must submit such proposals to the Company no later than April 26,
2000 in order to be included in the Company's proxy statement and
form of proxy. Such proposals must also comply with the requirements
of Rule 14a-8 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") relating to proposals of shareholders. If
notice of a shareholder proposal submitted outside the processes of
Rule 14a-8 under the Exchange Act is not received by the Company by
July 10, 2000, the persons named in the Company's form of proxy for
the next annual meeting of shareholders will have discretionary
authority to vote on the proposal in accordance with their best
judgment. Shareholder proposals should be submitted in writing to
the Company's principal executive office at 3230 Fallow Field Drive,
Diamond Bar, California 91765, Attention: Robyn S. Fredericks,
Secretary.
By Order of the Board of Directors
Robyn S. Fredericks
Secretary
<PAGE>
August 24, 1999
Diamond Bar, California
SHAREHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING MAY OBTAIN,
WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1999, INCLUDING THE FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES THERETO, UPON WRITTEN
REQUEST TO THE COMPANY AT 3230 FALLOW FIELD DRIVE, DIAMOND BAR,
CALIFORNIA 91765, ATTENTION: ROBYN S. FREDERICKS, SECRETARY. UPON
WRITTEN REQUEST DIRECTED TO MS. FREDERICKS, THE COMPANY WILL ALSO
FURNISH TO SUCH SHAREHOLDERS A COPY OF ANY EXHIBITS TO ITS ANNUAL
REPORT ON FORM 10-K FOR A FEE OF $.20 PER PAGE, PAYABLE IN ADVANCE.
THIS FEE COVERS ONLY THE COMPANY'S REASONABLE EXPENSES IN FURNISHING
SUCH EXHIBITS.
<PAGE>
Exhibit A
Please mark
your votes as
indicated in
this example
FOR all nominees listed below (except as marked to the contrary
below).
Discretionary authority to accumulate votes is granted.
WITHHOLD AUTHORITY to vote for all nominees listed below
ITEM 1-ELECTION OF DIRECTORS
Pac W. Dong, Harold Harrigian, Bruce G. Norman, Robert E. Weiss and
Clement Ziroli
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
write the name(s) of the nominee(s) on the space provided below.
ITEM 2--PROPOSAL to approve the appointment of Ernst & Young as independent
auditors of the Company for the fiscal year ending March 31, 2000.
FOR
AGAINST
ABSTAIN
IN THEIR DISCRETION, the proxies are authorized to vote upon such
other
business as may properly come before the meeting and at any
adjournments
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DISCRETION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 2
DESCSRIBED ON THE REVERSE SIDE OF THIS PROXY
AND FOR THE ELECTION OF THE PERSONS NOMINATED
AS DIRECTORS BY THE BOARD OF DIRECTORS.
Receipt of the Notice of
Annual Meeting of
Shareholders, the Proxy
Statement accompanying
said Notice and the Annual
Report to Shareholders for
the fiscal year ended
March 31, 1999 hereby is
acknowledged. The
undersigned shareholder
hereby revokes any proxy
heretofore given to vote
at said meeting.
Signature Signature Date
NOTE: Please sign as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
FOLD AND DETACH HERE
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
FIRST MORTGAGE CORPORATION
The undersigned hereby appoints Clement
Ziroli and Bruce G. Norman, and each of them, as
proxies, with power to act without the other and
with power of substitution, and hereby authorizes
them to represent and vote, as designated on the
other side, all the shares of the common stock of
First Mortgage Corporation standing in the name of
the undersigned with all powers which the
undersigned would possess if present at the Annual
Meeting of Stockholders of the Company to be held
September 22, 1999 and at any and all adjournments
thereof.
(Continued, and to be marked, dated and signed, on the other side)
FOLD AND DETACH HERE
